A Uniform, National Body of Law to Govern the Enforcement of Arbitration Agreements

American University Business Law Review American University Business Law Review

Article 3

A Uniform, National Body of Law to Govern the Enforcement of A Uniform, National Body of Law to Govern the Enforcement of

Arbitration Agreements Arbitration Agreements

Imre S. Szalai Loyola University New Orleans College of Law, [email protected]

American University Business Law Review American University Business Law Review

Article 3

A Uniform, National Body of Law to Govern the Enforcement of A Uniform, National Body of Law to Govern the Enforcement of

Arbitration Agreements Arbitration Agreements

Imre Stephen Szalai

AUNIFORM,NATIONALBOD(cid:60)OFLAW TO(cid:42)OVERNTHEENFORCEMENTOF ARBITRATIONA(cid:42)REEMENTS

I.Introduction...........................................................................................557 II.CourtsInterpretSection2oftheFAA,theStatute(cid:182)sMost

ImportantProvision,asEmbodyingaHybridFederal-State FrameworkforArbitrationAgreements.........................................558

III.TheConfusionandConflictingResultsArisingfromtheHybrid

NatureofSection2.........................................................................563

IV.CongressShouldAdoptaUniform,NationalStandard(cid:42)overning

ArbitrationAgreements..................................................................572 V.Conclusion...........................................................................................575

TheheartoftheFederalArbitrationAct(FAA)issection2,which containsafederalmandatethatarbitrationagreementsarevalid, irrevocable,andenforceable(cid:30)theFAA(cid:182)sremainingprovisionshelpcarry outthismandate.1Today,therearehundredsofmillionsofarbitration agreementsintheUnitedStates,2andunfortunately, thegoverning

standardsforevaluatingtheenforcementoftheseagreementsarenot uniform.Asexplainedinmoredetailbelow,amosaicofdifferinglaws fromeachofthestatesandterritoriesunderminesthefederalmandatein section2,andthesedifferinglawscanleadtocomplexity,uncertainty, conflictingcourtdecisionsregardingtheenforceabilityof identical arbitrationprovisions,andyearsofcostlylitigationaboutwhetherthereis anobligationtoarbitrate.Topromotethebenefitsofarbitration,thelegal frameworkthatissupposedtofacilitatearbitrationshouldbeclearand withoutconflictingstandards. Confusinganduncertainstandards underminethepotentialspeedandefficiencyofarbitrationandcanspawn sub-disputesabouttheenforcementofarbitrationagreements.Thisessay proposesthedevelopmentofauniform,nationalstandardtogovern arbitrationagreementsandreplacetheexisting,confusingstandards.

PartIIofthisessayexplainsthecurrentinterpretationoftheFAA,with thehybrid,federal-statenatureofsection2ofthestatute.PartIIIofthe essaythenexploresthedifferingstandards,conflictingdecisions,and confusionthatarisesoutofthehybridnatureofthestatute.Finally,PartIV concludeswithproposals standard governingarbitrationagreements.

todevelopauniform,national

TheFAA,assection2iscurrentlyinterpreted,doesnotcontaina uniform,nationalstandardforevaluatingwhetherarbitrationagreements arebinding.Section2oftheFAA,theheartofthestatute,declaresthat arbitrationagreementsare(cid:179)valid, In recogni(cid:93)ingthatarbitrationclausesinvolvealegally-bindingcommitment, section2alsocontainsasignificantsafetyvalveorexception(the(cid:179)Savings Clause(cid:180 :arbitrationagreementsaregenerallybinding(cid:179)saveuponsuch

irrevocable,andenforceable.(cid:180)3

groundsasexistatlaworinequityfortherevocationofanycontract....(cid:180)4 Aparty(cid:182)sobligationtoarbitratecanthusbenullifiedpursuanttothe SavingsClause.

Overtime,theinterpretationoftheSavingsClausehassolidified,and today,courtsinterprettheSavingsClauseasincorporatingthecontract lawsofeachofthedifferentfiftystates. InearlierSupremeCourt decisions,however,theCourtwouldsometimesanaly(cid:93)etheSavingsClause withoutreferringtothelawsofanyspecificstate.Forexample,inthe 1967caseofPrimaPaintCorp.v.Flood&ConklinManufacturingCo.,5 some(cid:45)usticesdiscussedthereasonsforrevokingacontractunderthe SavingsClauseingeneralterms,asiftheywereapplyingageneral,federal commonlawofnoparticularstate.6 Inanaly(cid:93)ingthe(cid:179)grounds(cid:180)forthe revocationofacontractrecogni(cid:93)edintheSavingsClause,the(cid:45)ustices explainedthat(cid:179)(cid:62)f(cid:64)raud,ofcourse,isoneofthemostcommongroundsfor revokingacontract.Ifthecontractwasprocuredbyfraud,then,unlessthe defraudedpartyelectstoaffirmit,thereisabsolutelynocontract,nothing tobearbitrated.(cid:180)7These(cid:45)usticesinPrimaPaintdiscussedfraudwithout referringtothefraudlawsofanyparticularstate,eventhoughfraudlaws canvaryundercommonlaw.8

Inthe1984caseofSouthlandCorp.v.Keating,9theCourtexplainedthat (cid:179)apartymayassertgeneralcontractdefensessuchasfraudtoavoid enforcementofanarbitrationagreement,(cid:180)butagain,likeinPrimaPaint, inSouthlanddidnotspecificallyrefertothelawsofany theCourt particularstate.10However,inaseparateopinion,concurringinpartand dissentinginparttotheSouthlandma(cid:77)ority,(cid:45)usticeStevensexpoundedon theSavingsClauseandexplainedthatthe(cid:179)groundsforrevocation(cid:180)area matteroffederalcommonlaw:(cid:179)The(cid:62)FAA(cid:64),however,doesnotdefine whatgroundsforrevocationmaybepermissible,andhenceitwouldappear

that the(cid:77)udiciarymustfashionthelimitationsasamatteroffederal commonlaw.(cid:180)11Forthisprincipleregardingthe(cid:77)udicialcreationofa federalcommonlaw,(cid:45)usticeStevenscitedTextileWorkersUnionv. LincolnMillsofAmerica12 cid:179)TextileWorkers(cid:180 ,wheretheCourtconstrued theLaborManagementRelationsActof1947inthecontextofenforcing anarbitrationclauseinacollectivebargainingagreement.13TheCourtin TextileWorkersexplainedthatthefederallaborstatuteatissuewasnot merely(cid:77)urisdictional,butalso(cid:179)authori(cid:93)e(cid:62)d(cid:64)federalcourtstofashiona bodyoffederallawfortheenforcementofthesecollectivebargaining agreements.(cid:180)14Underthisauthority,the(cid:77)udiciarywoulddevelopfederal commonlawbyrelyingonthepoliciesofthenationallaborlaws,15andthe SupremeCourtwascarefultoexplainthatfederallaw,notstatelaw,would governtheenforcementofcollectivebargainingagreements(cid:178)although compatiblestatelawcouldplayalimitedroleininformingthe(cid:77)udicial developmentofthefederalcommonlaw.16However,inthislaborlaw context,(cid:179)(cid:62)a(cid:64)nystatelawapplied...(cid:62)would(cid:64)beabsorbedasfederallaw and(cid:62)would(cid:64)notbeanindependentsourceofprivaterights.(cid:180)17Similarly,in thecontextoftheFAA,(cid:45)usticeStevensrecogni(cid:93)edthatpoliciesfoundin statelawcouldinformthefederalcommonlawstandardhesawinthe SavingsClause,andhealsoacknowledgedthatlowercourtscommonly lookedtostatelawwhenanaly(cid:93)ingtheformationofarbitrationagreements undersection2oftheFAA.18

Ayearlaterin1985,theSupremeCourtonceagaindiscussedthe (cid:179)grounds(cid:180)forrevocationundertheSavingsClauseingeneraltermsin MitsubishiMotorsCorp.v.SolerChrysler-Plymouth,Inc.19 cid:179)Mitsubishi(cid:180 , withoutreferencingthelawsofaparticularstate.20TheCourtexplained lowercourtsapplyingtheFAA(cid:179)shouldremainattunedtowellthat supportedclaimsthattheagreementtoarbitrateresultedfromthesortof

fraudoroverwhelmingeconomicpowerthatwouldprovidegrounds(cid:181)for therevocationofanycontract.(cid:182)(cid:180)21(cid:45)ustlikeinPrimaPaint,theCourtin MitsubishiappearstotreattheSavingsClauseingeneraltermsandas embodyinggeneralprinciples,without referringtothelawsofany particularstate.22

In1987,theCourtmadeitscleareststatementaboutthesourceoflaw governingtheSavingsClause.23InPerryv.Thomas,24theCourtdescribed section2oftheFAAinhybridterms,asinvolvingamixoffederaland statelawprinciples.25Forthemaindeclarationormandatethatarbitration agreementsarefullybinding,theCourtexplainedthat(cid:179)anagreementto arbitrateisvalid,irrevocable,andenforceable,asamatteroffederal law.(cid:180)26However,regardingtherevocationgroundssetforthintheSavings Clause,theCourtpivotedandexplainedthesourceforsuchgroundswas statelaw,notfederallaw,andonlystatelawthatappliedto(cid:179)contracts generally.(cid:180)27

ThisdescriptioninPerryregardingsection2asinvolvingahybridof federallawandstatelawwasdictuminafootnote.28TheCourtinthis footnotewasdescribingapotentialunconscionabilitydefensethat the lowercourthadnotdecidedandthattheCourtexpresslydeclinedto address.29

AboutadecadeafterPerry,inthemid-1990s,theCourtmoredirectly beganadoptingthehybridcharacteri(cid:93)ationofsection2andtheviewthat the(cid:179)grounds(cid:180)forrevocationarebasedonstatelaw,notfederalcommon law.30 theCourt describedtheroleofstatelawandstateregulationinthecontextofthe SavingsClauseasfollows:

InAllied-BruceTerminixCompaniesv.Dobson,31

Similarly,

Inc.v.Casarotto,33

inDoctor’sAssociates,

theCourt explainedthatthetextofsection2providesfortheapplicationof(cid:179)state law(cid:180)ifthelawappliestocontractsgenerally.34Also,aroundthesametime period,theCourtcitedthefootnotefromPerryandexplainedthatwhen courtsevaluatewhetheranarbitrationagreementexists,courts(cid:179)should applyordinarystate-lawprinciples thatgoverntheformationof contracts.(cid:180)35

AlthoughthereweresomeearlierSupremeCourtdecisionsthatwerenot clearanddidnotreferenceanyparticularstatelawwhenconstruingthe SavingsClause,andalthough(cid:45)usticeStevensinSouthlandwrotean opinionadoptingtheviewthatfederalcommonlawwouldgovernthe groundsforrevocation,36ithasbecomewellacceptedtodaythatcourts looktothecontractlawsofthefiftystateswhenevaluatinganarbitration clauseunderthegroundsforrevocationsetforthintheSavingsClause.37 Insum,courtstodayinterpretsection2asembodyingahybridofboth federallawandstatelaw.Thereisafederalmandatetoenforcearbitration agreements,andsimultaneously,section2incorporatesstatecontractlaw asafoundationtoassesswhetherthereisanobligationtoarbitrate.

Thehybridfederal-statelawnatureofsection2complicatesthe implementationandenforcementofarbitrationclauses.Thecontractlaws ofAlabama,Alaska,Ari(cid:93)ona,Arkansas,California,andsoon,forallfifty statesthroughWyoming,couldpotentiallyapplytoarbitrationclausesused nationwide.Forexample,ifsomeonewishestoimplementanarbitration clauseforuseacrossthecountry,theenforceabilityoftheclausewouldnot becertainuntiloneanaly(cid:93)esthestatecontractlawsofeachstatewherethe clausemaybeused.38Notonlymustthelanguageortextoftheclause satisfythecontractlawofthestate,orstates,atissue,buttheparticular methodofimplementingtheclausemustalsosatisfythegoverningcontract lawofthestate,orstates.39

Thissectionexploresconflictingstatelaw,theuncertainty,andthe inconsistentresultsthatarisefromthehybridnatureofsection2ofthe FAA.Asexplainedbelow,therearemanydifferentaspectswherestate contractlawscanconflictinaparticularscenario,andthereareexamples whereonecourtenforcesanarbitrationagreementwhileanothercourt invalidatestheexactagreement.

Beforeexploringthedifferencesinhowstatecontractlawsmayimpact arbitrationagreements,onethresholdcomplicationarisingfromthehybrid natureofsection2involvestheanalysisordeterminationofwhichstate lawtoapply.Inotherwords,beforeonecanassesstheenforceabilityofan arbitrationagreementunderstatelaw,thethresholdissuemayariseof timewhichstatecontract consumingdisagreement,andlitigationaboutwhichstatecontractlaw governs.Asanillustration,inPokornyv.Quixtar,Inc.,40theparties disagreedandlitigatedforatleasttwoyears,atboththedistrictcourtlevel andonappealbeforetheNinthCircuit,onwhetherthecontractlawof MichiganorCaliforniawouldgovernthearbitrationclauseunderthe FAA.41Recogni(cid:93)ingthat thehybridnatureofsection2createdthis thresholdissue,theNinthCircuitexplainedthatbeforeacourtapplies

Therecanbeuncertainty,

lawgoverns.

(cid:179)state-lawprinciplestodeterminethevalidityofanarbitrationagreement, itmustdeterminewhichstate(cid:182)slawstoapply.(cid:180)42TheNinthCircuitthen proceededtoengageinacomplexanalysisregardingwhichstate(cid:182)scontract lawsgoverned,andtheNinthCircuitrecogni(cid:93)edthattherearedifferent testsorframeworkstouse,dependingonthesituation,inordertoselectthe correctstate.43Ultimately,theNinthCircuitheldthatthegovernment interestanalysis,usedbyCaliforniacourts,wouldgovernthethreshold analysisofwhichstatecontractlawstoapply,andthisparticularCalifornia analysisinvolvedathree-parttest.44TheNinthCircuitthendiscussedand appliedthis interestanalysisandultimately concludedthatCaliforniacontractlaw,asopposedtoMichigancontract law,wouldgoverntheevaluationofthearbitrationagreementundersection 2oftheFAA.45

three-partgovernment

Inanothercaseinvolvingthethresholdissueofwhichstatecontractlaw governs,theSixthCircuitfoundthatOhiochoice-of-lawprincipleswould helpguidetheselectionofwhichstate(cid:182)scontractlawswouldapplybecause anOhiofederalcourt,sittingindiversity,wasevaluatingtheenforcement ofthearbitrationmatterathand.46TheSixthCircuitfoundthatOhio(cid:182)s choice-of-lawprinciplesfailedtoprovideaclearanswerregardingthe governingstate(cid:182)scontractlaw.47However,thisuncertaintywasnota probleminthisparticularcasebecauseonepartyarguedOhio(cid:182)scontract lawapplied,andtheotherpartyfailedtobriefthegoverninglawissueand didnotob(cid:77)ecttoapplicationofOhio(cid:182)scontractlaw.48Nevertheless,this Ohiocasehelpsillustratethecomplexityandunpredictabilitythatcanexist whenevaluatingtheenforcementofanarbitrationclause.Insum,itiswell establishedthatstatecontractlawgovernstheenforcementofanarbitration therecanbedelays,disagreement,and clauseundersection2,but

uncertaintyregardingwhichstate(cid:182)scontractlawswillgovern.

Theenforceabilityofaparticulararbitrationclausemaydependon whichstate(cid:182)scontractlawsapply,withaparticulararbitrationclausebeing enforceableinsomestatesbutnotinotherstates.Thecontractlawof statescanvarywithrespecttomultipledifferentaspects,andasaresult, therecanbewasteful litigation,uncertainty,andconflicting(cid:77)udicial decisionsregardingtheenforcementofanarbitrationagreement.

Oneexampleofhowstates(cid:182)contractlawscanvaryincludesdifferences regardingthelevelofdetailrequiredforthetextofanarbitrationclause. Forexample,inNew(cid:45)ersey,anycontractthatwaivesaconstitutionalor statutoryright(cid:179)muststateitspurposeclearlyandunambiguously.(cid:180)49 Underthisstandard,aclausethatminimallystatesthatalldisputes(cid:179)shall besubmittedtobindingarbitration(cid:180)isnotenforceablebecausethecontract failstoexplainandaffirmativelystatethatthepartiesarewaivingtheright toa(cid:77)udicialforum.50Arbitrationagreementshavetobemoredetailedand explicit tomeetNew(cid:45)ersey(cid:182)sheightenedwaiverstandard comparedtothelawofotherstates,butothercourtshavere(cid:77)ecteda heightenedwaiverstandardinconnectionwitharbitrationagreements.51

inorder

Anotherexampleoftheinconsistencyanduncertaintythatcanarise whentryingtoenforceanarbitrationclauseunderthevaryingcontractlaws ofdifferentstatesinvolvesthedoctrineofunconscionability.Thedoctrine ofunconscionabilitycanbeusedtoinvalidateanarbitrationagreement,but theprecisecontoursorrequirementstoshowunconscionabilitycanvary lawregarding fromstatetostate. unconscionability of elements unconscionability:proceduralunconscionability(whichgenerallyfocuses onthefactualcircumstancesofacontract(cid:182)sformationorthebargaining process)andsubstantiveunconscionability(whichgenerallyfocusesonthe (cid:179)one-sided,overly-harsh,(cid:180)unfairnatureofthetermsofthearbitration agreement).52Insomestates,likeAri(cid:93)ona,NewMexico,Washington,and Missouri,bothelementsofunconscionabilitydonotneedtoexist.53

Forexample, to

statecontract

involve

tends

two

However,otherstatesrequireashowingofbothsubstantiveandprocedural unconscionability.54Courtshavefoundthatthedifferencesamongstate contractlawregardingunconscionabilitycanpreventthecertificationofa class.55

Thereexiststension,uncertainty,andconflictingdecisionsregarding whetherparticulararbitrationprovisionsorparticularcontractingscenarios areunconscionableunderstatelaw.Forexample,ifanarbitrationclause purportstoshortenastatuteoflimitationsbystatingthatarbitralclaims mustbefiledwithinanabbreviatedtimeperiod,courtshavereached differentconclusions theabbreviatedstatuteof limitationsisenforceableorsubstantivelyunconscionable.56Another scenariothathasproduceddifferent,conflictingcourtdecisionsiswhether thefailuretoattacharbitralrulestoacontractmakesthecontract

regardingwhether

procedurallyunconscionable.57Somearbitrationclausespurporttogive onepartytherighttounilaterallymodifythearbitrationclause,andcourts acrossthecountryhavealsodifferedregardingtheunconscionabilityof suchterms.58Additionally,courtshavereacheddifferentconclusionsasto whetheraconfidentialityprovisionmakesanarbitrationagreement unconscionable.59

Withdifferencesinstatelawsarisingfromthehybridnatureofsection2, courtdecisionssometimesdifferregardingtheenforceabilityofidentical arbitrationagreements. theFifthCircuitenforcedan employmentarbitrationclauseunderTexas(cid:182)unconscionabilitylaw,while theNinthCircuitinvalidatedthesameclauseunderCalifornialaw.60There

Forexample,

factpatternshaveproducedinconsistent

areotherexampleswherecourtsreachinconsistentresultsregardingthe enforceabilityofthesamearbitrationclause,suchasaclauseinanursing homeagreement.61 Otherparticular

results regardingtheenforceabilityofarbitrationclauses.Onesuchinstanceis whenacompanypurportstoamenditsoriginalconsumercontractby addinganarbitrationclause.62 Thereisalsotensionregardingthe enforcementofarbitrationclausesbasedonthecontinuedemploymentofa worker,withsomecourtsholdingthatcontinuedemploymentconstitutes adequateconsiderationforanewly-addedarbitrationclause,whileother courtsreachtheoppositeconclusionbasedondifferentstatecontract laws.63Anothersituationgivingrisetoconflictingdecisionsoccurswhena contractcontainsbothanarbitrationclauseandaforumselectionclause requiringclaimstobefiledincourt.Somecourtsconstruethetwoclauses inharmony,asrequiringarbitrationandalsorequiringanylitigation regardingthearbitrationtocomplywiththe(cid:77)udicialforumselection clause.64However,othercourtsfindthatthereisnoobligationtoarbitrate whenacontractcontainsbothanarbitrationclauseand(cid:77)udicialforum

selectionclause.65

Anotherfactpatternthatcanproducevaryingresultsunderthedifferent contractlawsofvariousstatesinvolvestherightsandobligationsofnonInJudgev.Unigroup,Inc.,66 cid:179)Unigroup(cid:180 the signatoriestoacontract. courtaddressedtheenforcementofarbitrationagreementsbynonsignatoriesinthetransportationservicesindustry.67Theplaintiffsfrom differentstatesdidnotdirectlyenterintocontractswiththedefendant movingcompanies,andthus, thecourthadtoaddresswhetherthe defendants,asnon-signatoriestothecontractscontainingarbitration clauses,couldcompeltheplaintiffs(cid:182)claimstoarbitration.68Withthe plaintiffsbeingfromfourdifferentstates(Florida,New(cid:45)ersey,Virginia, andOhio),thecourthadtoanaly(cid:93)ethecontractlawsofeachstateto evaluatewhethernon-signatoriescouldenforceacontract.69TheFlorida plaintiffs(cid:182)claimsandallegationsagainstthenon-signatorydefendantswere intertwinedwithandaroseoutofthecontractcontainingthearbitration clause,andbasedonFloridacontractlawinvolvingnon-signatories,the courtheldthenon-signatorycouldcompelarbitrationbasedonan intertwiningclaimstheory.70FortheNew(cid:45)erseyplaintiffs,thecourt recogni(cid:93)edthatNew(cid:45)erseycontractlaw,unlikeFloridalaw,didnot recogni(cid:93)eanintertwiningclaimstheory.71 Instead,inordertocompel arbitration,thenon-signatorydefendantswouldhavetoshowthattheNew (cid:45)erseyplaintiffsengagedinconduct inducedreliance,andthe defendantsreliedontheconducttotheirdetriment.72Thecourtfoundthat thenon-signatorydefendantsdidnotdemonstrateanydetrimental reliance.73Likewise,fortheOhioplaintiffs,thecourtdidnotallowthe non-signatorydefendantstocompelarbitrationbecauseOhiolawrequired

that

detrimentalreliancetoexistforestoppel,anddetrimentalreliancewasnot demonstrated.74Similarly,fortheVirginiaplaintiffs,thecourtdidnot allowthenon-signatorydefendantstocompelarbitrationbecausethe defendantsfailedtoshowrelianceonanactionorstatementoftheVirginia plaintiffs,whichwasrequiredunderVirginialaw.75TheUnigroupcase demonstrateshowtheenforceabilityofaparticulararbitrationclausecan varydependingonwhichstatecontractlawcontrolsunderthehybrid functioningofsection2oftheFAA.76

Therecanalsobealackofuniformityinhowcourtsanaly(cid:93)epotential flawsinconnectionwithanarbitrationagreement.Forexample,ina situationwherealawyeristryingtoimplementandenforceanarbitration clausewithaclient,somecourtswillanaly(cid:93)ethelawyer(cid:182)sfailuretoexplain thearbitrationprovisionsundertheconceptoffiduciaryduty.77However, courtshavealsoanaly(cid:93)edthissamesituation, thelawyer(cid:182)sfailureto thedoctrineofprocedural explainarbitrationtoaclient,under unconscionability.78Similarly,harshorone-sidedtermsinanarbitration clausehavebeenanaly(cid:93)edunderdifferentdoctrines,suchassubstantive unconscionability,79theeffectivevindicationdoctrine,80orthebreachofa covenantofgoodfaithandfairdealing.81Withdifferentstatelawsand differentpossibledoctrines,greaterclaritycanbebroughttotheevaluation ofarbitrationclauseswithauniform,nationalstandard.

Theaboveissuesandcourtcasesareafewexamplesregardinghowthe enforceabilityofarbitrationclausescandifferdependingonstatecontract

lawincorporatedthroughsection2oftheFAA.Thereareconflicting decisionsanduncertaintiesregardingtheenforceabilityofarbitration clausesinother,differentsettingsbasedondifferingstatecontractlaw.82

Atamorefundamentallevel,theFAAneverdefinesthecriticalterm (cid:179)arbitration,(cid:180)andthereisconfusionoverthedefinitionorscopeof arbitrationundertheFAA.Forexample,althoughsomecourtsholdthat non-bindingproceduresarearbitrationundertheFAA,83othercourtstreat non-bindingproceduresasbeyondthescopeoftheFAA.84Furthermore, thereistensionastowhetheranappraisalprocessshouldcountas arbitrationundertheFAA.85

Tomakemattersworseandmultiplytheexistingconfusionregardingthe verymeaningofarbitration,thereisalsouncertaintyoverwhetherstatelaw orfederallawcontrolsthedefinitionofarbitrationundertheFAA.For example,inDrucoRestaurants,Inc.v.SteaknShakeEnterprises,Inc.86 cid:179)Druco(cid:180 ,afederaldistrictcourtconcludedthatanon-bindingarbitration provisioninafranchiseagreementdidnotfallunderthemeaningof arbitrationundertheFAA.87TheDrucodistrictcourtspecificallyquoted section2oftheFAAandconcludedthatthenon-bindingprocessdidnot qualifyasanagreement(cid:179)tosettlebyarbitrationacontroversy.(cid:180)88 In quotingandrelyingdirectlyonthefederalstatute,thedistrictcourt(cid:182)s

analysisseemstoberootedinfederallaw.However,theSeventhCircuit, inaffirmingDruco,reliedonarelated,butslightlydifferent,rationale.89 TheSeventhCircuitheldthatthenon-bindingarbitrationprovisionwas illusoryandtooindefiniteunderstatecontractlawtobeenforced.90Thus, thereisuncertaintyastowhetherstatelaworfederallawcontrolsthevery definitionofarbitrationundertheFAA.91

Insum,thissectionoftheessaydemonstratedhowthereistension, confusion,andinconsistentresultsregardingdifferentdimensionsofthe enforcementofarbitrationclauses.

Asdiscussedabove,thereisconfusion,complexity,differingstandards, andconflicting(cid:77)udicialdecisionsregardingdifferentdimensionsofthe enforceabilityofanarbitrationclauseundertheFAA(cid:182)scurrentframework, andwiththischaoticlegallandscape,therecanbeyearsofwasteful,costly litigationandappealsinvolvingtheenforcementofasinglearbitration clause.Althougharbitrationhaspotentialbenefits,includingspeedand efficiency,92thecurrentmuddledlandscapeunderminessuchpotential benefitsandcanadditionallyspawndisagreementsabouttheenforcement ofanarbitrationclause.Tohelppromotethebenefitsofarbitration, Congressshouldimplementauniform,nationalstandardtogovernthe validityorenforceabilityofarbitrationagreements.Variouspossibilitiesor routesareavailabletoaccomplishthisgoal.

Onepossiblerouteforthecreationofauniform,nationalstandardfor arbitrationagreementswouldbetheuseoffederalcommonlaw,whereby federalcourtswoulddevelopthegoverningprinciples.(cid:45)usticeStevensin hispartialdissentingandconcurringopinioninSouthlandadoptedtheview thatsection2shouldbeconstruedasprovidingforafederalcommonlaw

similar

regardingtheenforcementofarbitrationagreementsinconnectionwith interstatecommerce, totheLaborManagementRelations Act:(cid:179)The(cid:62)FAA(cid:64),however,doesnotdefinewhatgroundsforrevocation maybepermissible,andhenceitwouldappearthatthe(cid:77)udiciarymust fashionthelimitationsasamatteroffederalcommonlaw.(cid:180)93Insupportof thisinterpretationoftheFAA,(cid:45)usticeStevensreliedonTextileWorkers, whichinvolvedtheenforcementofanarbitrationprovisioninacollective bargainingagreementandwheretheCourtexplainedtheLabor ManagementRelationsAct(cid:179)authori(cid:93)esfederalcourtstofashionabodyof federal collectivebargaining agreements.(cid:180)94

enforcementof

lawfor

these

the

Lowercourtsovertheyearshavefollowedthedirectiverecogni(cid:93)edin TextileWorkerstodevelopafederalcommonlawregardingcollective bargainingagreements,95andsimilarly,courtscoulddevelopafederal In commonlawsurroundingtheenforcementofarbitrationagreements. fact,atleastonefederalappellatecourt,consistentwith(cid:45)usticeStevens(cid:182) opinioninSouthland,hasrecentlyopinedthatonecouldconstruethe SavingsClauseas(cid:179)adopt(cid:62)ing(cid:64)auniformfederaltestthatusesthecommon lawofcontractsasaguidetowhethera(cid:181)valid(cid:182)or(cid:181)enforceable(cid:182)arbitration agreementexists.(cid:180)96

TheSupremeCourt,since2019,hasbecomemoretextualwhen interpretingtheFAA,97 currentgoverning interpretationsoftheSavingsClause,whichcallforapplicationofstate law,thetextoftheSavingsClausedoesnotexplicitlyrefertothecontract lawsofthestates.TheSupremeCourtcouldcreateanationalstandardby

andcontrary

tothe

reinterpretingsection2inamannerlike(cid:45)usticeStevensdidinSouthland, asauthori(cid:93)ingfederalcourtstofashionanarrowbodyoflawgoverningthe enforcementofarbitrationclauses.98Forexample,theCourtcouldexplain thatitsobservationinthefootnoteinPerryv.Thomasregardingtheuseof statelawwasmeredictum.99However,iftheCourtdoesnotstepinto reinterpretsection2,asitlikelywillnot,Congresscouldamendsection2 toincludeanexpressdirectiveforfederalcourtstodevelopafederal commonlawregardingtheenforcementofarbitrationagreements.100

AnotherroutetodevelopanationalbodyoflawwouldinvolveCongress amendingtheFAAtoincludespecificprinciples togovernthe enforceabilityofarbitrationagreements.Forexample,Congresscould borrowandenactcertainprovisionsoftheUniformCommercialCode (UCC)toassistwiththedevelopmentofgoverningprinciples.Congress couldamendtheFAAtoincorporateprovisionsofsection2-302ofthe UCC,whichdealswithunconscionability,orsection2-318,whichdeals withnon-signatories,becauseissuesofunconscionabilityandnonsignatories arbitration agreements.101Congress,ofcourse,isnotlimitedtolookingnarrowlyor solelyattheUCCandcoulddevelopandadoptother,explicitstandardsto governtheenforceabilityofarbitrationagreements.

enforcement

arisewith

regularly

the

of

Congress

governing

arbitration

agreements.

Insum,Congresshasdifferentoptionstocreateauniform,national standard could comprehensivelyregulatetheenforcementofarbitrationagreementsby adoptingclearstandardstocoverthescopeoflikelyissuesthatarisein connectionwiththeenforcementofsuchagreements.Alternatively, insteadofcomprehensive,explicitstandards,Congresscouldsetfortha fewbasicprinciplesandinstructthe(cid:77)udiciarytodevelopcommonlawto fillinthegapsandaddressremainingissues,oritcouldauthori(cid:93)ethe (cid:77)udiciarytodevelopacomprehensivecommonlawtoaddressthe enforceabilityofanarbitrationagreementinconnectionwithinterstate commerce.

final

TheFAA(cid:182)sdraftersduringthe1920swereprimarilybusinessgroups seekingtoadvancetradeandthegrowingfieldofinterstatecommerce,102 andtheydesignedtheFAAtofacilitatecommercebyprovidingforaquick, binding, resolutionofcontractualdisputesregardinginterstate shipments.Asapracticalmatter,theFAAwasenactedtoservetheneeds andinterestsofbusinesses,anditwasoriginallyenvisionedthatanylegal proceedingstofacilitatearbitrationwouldtake(cid:77)usta(cid:179)fewdays(cid:180)103(cid:178)a starkcontrasttotheconfusion,uncertainty,anddelaysthatexisttodayand produceyearsoflitigationandappeal.

WiththecentennialanniversaryoftheFAAin2025,itishelpfulto examinethecurrentuseandoperationoftheFAA(cid:182)smachinery,compared tothegoalsofthestatutewhenoriginallyenacted.Fine-tuningtheFAAto adoptuniform,national,clearstandardsofenforcementwouldbean improvementoverthecurrent,chaoticlandscape.Arecalibrationislong overdueandwouldhelppromotethevaluesofarbitrationandrestorethe originalgoalsoftheFAA: tosupportinterstatecommerceinamore efficient,morepowerfulmanner.

--- FOOTNOTES ---

Part of the Business Organizations Law Commons, Commercial Law Commons, and the Dispute

Resolution and Arbitration Commons

Part of the Business Organizations Law Commons, Commercial Law Commons, and the Dispute

Resolution and Arbitration Commons

IMRESTEPHENS(cid:61)ALAI(cid:13)

I.INTRODUCTION

(cid:13)ImreStephenS(cid:93)alaiisthe(cid:45)udge(cid:45)ohnD.WesselDistinguishedProfessorofSocial (cid:45)usticeatLoyolaUniversityNewOrleansCollegeofLaw.Hehasservedasan arbitratorinhundredsofcases,andhisscholarshipfocusesonthehistoryand developmentofarbitrationintheUnitedStates.

1.See9U.S.C.(cid:134)(cid:134)1(cid:177)16. 2.

ImreS.S(cid:93)alai,ThePrevalenceofConsumerArbitrationAgreementsby America’sTopCompanies,52U.C.DAVISL.REV.ONLINE233(2019)(statingthat eighty-oneofAmerica(cid:182)slargestcompanieshaveusedarbitrationagreementsfor consumertransactions,andbyconservativeestimates,therearemorethan826million consumerarbitrationagreementsinAmerica)(cid:30)seeAlexander(cid:45).S.Colvin,TheGrowing 27, Use https:(cid:18)(cid:18)www.epi.org(cid:18)publication(cid:18)the-growing-use-of-mandatory-arbitration(cid:18) thatmorethan60millionAmericanworkersareboundbyarbitrationagreements).

ofMandatoryArbitration,ECON.POL(cid:182)(cid:60)INST.

2017), (asserting

(Sept.

II.COURTSINTERPRETSECTION2OFTHEFAA,THESTATUTE(cid:182)SMOST IMPORTANTPROVISION,ASEMBOD(cid:60)IN(cid:42)AH(cid:60)BRIDFEDERAL-STATE FRAMEWOR(cid:46)FORARBITRATIONA(cid:42)REEMENTS

3.9U.S.C.(cid:134)2.BeforetheFAA(cid:182)senactment,courtswouldgenerallyrefuseto enforcepre-disputearbitrationagreements,andsection2reversedthis(cid:77)udicialhostility. IANR.MACNEIL,AMERICANARBITRATIONLAW:REFORMATION,NATIONALI(cid:61)ATION, INTERNATIONALI(cid:61)ATION19(cid:177)20(1992) (recogni(cid:93)ingthatalthoughpre-1920slaw recogni(cid:93)edthevalidityofarbitralawards,therewasa(cid:179)relativelackofenforceabilityof suchagreementsbeforeanawardwasmade(cid:180 .Thepassageofsection2enabled arbitrationtospreadbeyondthenarrowsettingofsmallercommunitiesortrade associationsandexpandtocoverinterstateshipments.Id.at45(recogni(cid:93)inghowthe enactmentoftheFAAenabledtheextensionofarbitrationbeyondsmallertrade associations).

4.9U.S.C.(cid:134)2.In2022,Congressaddedasignificantexceptionregardingsexual assaultandsexualharassmentclaims.EndingForcedArbitrationofSexualAssault andSexualHarassmentActof2021,Pub.L.No.117-90,136Stat.26(2022)(codified asamendedat9U.S.C.(cid:134)(cid:134)401,402).

Id.at412(Black,(cid:45).,dissenting).

5.388U.S.395(1967). 6.Seeid.at404n.12. 7. 8.LewisTreeServ.,Inc.v.LucentTechs.Inc.,211F.R.D.228,236(S.D.N.(cid:60). 2002) cid:179)Thecommonlawoffraudismateriallydifferentinthefiftystates.The elementsoffraudvarygreatlyfromstatetostate,withrespecttoelementsincluding mitigation,causation,damages,reliance,andthedutytodisclose.(cid:180 (citationsomitted).

9.465U.S.1(1984). Id.at16n.11.

10.

Id.at19(emphasisadded)(citationomitted).

11. 12.353U.S.448(1957). 13. 14. 15. 16.Seeid.at457 cid:179)Butstatelaw,ifcompatiblewiththepurposeof(cid:62)thefederal laborlaw(cid:64),mayberesortedtoinordertofindtherulethatwillbesteffectuatethe federalpolicy.(cid:180 (citationomitted).

Id.at451. Id. Id.at456.

Id.

17. 18.SouthlandCorp.v.(cid:46)eating,465U.S.1,19(cid:177)20(1984). 19.473U.S.614(1985). 20.

Id.at646(cid:177)47.

Inanyevent,(cid:62)section(cid:64)2givesStatesamethodforprotectingconsumers againstunfairpressuretoagreetoacontractwithanunwanted

Id.at627(citationomitted). Id.at646.

21. 22. 23.Perryv.Thomas,482U.S.483,491(1987). 24.482U.S.483(1987). 25. 26.

Id.at490. Id.at492n.9(emphasisinoriginal)(citingMosesH.ConeMemorialHospital

v.MercuryConstructionCorp.,460U.S.1,24(1983 .

Id.at492n.9. Id.

27. 28. 29.Perry,482U.S.at493n.9. 30.See,e.g.,Allied-BruceTerminixCos.v.Dobson,513U.S.265,281(1995). 31.513U.S.265(1995).

arbitrationprovision.Statesmayregulatecontracts,includingarbitration clauses,undergeneralcontractlawprinciplesandtheymayinvalidatean arbitrationclause(cid:179)uponsuchgroundsasexistatlaworinequityforthe revocationofanycontract.(cid:180)32

Id.at686(cid:177)87.

Id.(emphasisinoriginal)(quoting9U.S.C.(cid:134)2).

32. 33.517U.S.681(1996). 34. 35.FirstOptionsofChi.,Inc.v.(cid:46)aplan,514U.S.938,944(1995)(citations omitted)(cid:30)seealsoArthurAndersenLLPv.Carlisle,556U.S.624,630(cid:177)31(2009) (statingthatstatelawisapplicabletodeterminewhetheranarbitrationagreementis bindingundersection2oftheFAA).

36.Seesupranotes11(cid:177)18andaccompanyingtext. 37.See,e.g.,Tripletv.Menard,Inc.,42F.4th868,871(cid:177)72(8thCir.2022) (examiningthevalidityofanarbitrationagreementundertheFAAbyapplyingSouth Dakotacontractlaw)(cid:30)Lambertv.SignatureHealthcare,LLC,No.19-11900,2022WL 2571959,at(cid:13)4(11thCir.(cid:45)uly8,2022)(examiningthevalidityofanarbitration agreementundertheFAAbyapplyingFloridacontractlaw)(cid:30)Shelbyv.Brookdale SeniorLiving,Inc.,No.21-15547,2022WL1657245,at(cid:13)1(cid:177)2(9thCir.May25,2022) (examiningthevalidityofanarbitrationagreementundertheFAAbyapplyingAri(cid:93)ona contractlaw)(cid:30)Campbellv.(cid:46)eagleInc.,27F.4th584,585(7thCir.2022)(quotingthe FAA(cid:182)sSavingsClause,(cid:179)arbitrationispermissibletotheextent,andonlytotheextent, thatstatelawwouldenforceotherequivalentagreements(cid:180 (cid:30)Solomonv.CARiteCorp. LLC,837F.App(cid:182)x355,359(6thCir.2020)(applyingMichigancontractlawand explainingthatcourtsundertheFAAreview(cid:179)theenforceabilityofanarbitration agreementaccordingtotheapplicablestatelawofcontractformation(cid:180 .

III.THECONFUSIONANDCONFLICTIN(cid:42)RESULTSARISIN(cid:42)FROMTHE H(cid:60)BRIDNATUREOFSECTION2

38.SeeTriplet,42F.4that870(cid:30)Shelby,2022WL1657245,at(cid:13)2. 39.Draftingthelanguageortextofaclauseisdifferent

thantheactof implementingaclauseinconnectionwitharelationshiportransaction,andcertain methodsofimplementationmaycauseproblemsundercontractlawsofcertainstates, evenifthetextoftheclauseiswelldrafted.

40.601F.3d987(9thCir.2010). 41.

Id.at993.

42. 43.

Id.at994. Id.(arguingthattheselectionofwhichstatelawwouldapplywasbeyondthe scopeofthechoiceoflawclause). Inotherwords,thechoiceoflawclausedidnot assistwithprovidingaclearanswertothisthresholdissueofwhichstatelawgoverns theenforcementofthearbitrationclause.

Id.at994(cid:177)95. Id.at996.

44. 45. 46.AtriCure,Inc.v.Meng,12F.4th516,525(6thCir.2021). 47.

Id.(notingthatthecontractcontainedachoiceoflawclause,butlikeinthe NinthCircuit(cid:182)sPokornydecision,theexistenceofachoiceoflawclausewasnot necessarilydispositiveindecidingwhichstatelawgovernstheenforcementofan arbitrationclause).TheSixthCircuitrecogni(cid:93)edtherewassome(cid:77)udicialauthority holdingthatchoiceoflawclausesdonotapplyifnon-signatoriesareinvolvedinthe disagreementregardingtheenforceabilityofanarbitrationclause.

48.

Id.

49.Atalesev.U.S.LegalServs.(cid:42)rp.,99A.3d306,309(N.(cid:45).2014). 50. 51.See,e.g.,Caleyv.(cid:42)ulfstreamAerospaceCorp.,428F.3d1359,1372(11thCir.

Id.at310(emphasisomitted).

2005).

52.Tadychv.NobleRidgeConstr.,Inc.,519P.3d199,202(Wash.2022)(en

banc)(cid:30)Peavyv.SkilledHealthcare(cid:42)rp.,470P.3d218,222(N.M.2020).

53.See,e.g.,Meekv.Meek,539P.3d920,927(Ari(cid:93).Ct.App.2023)(cid:30)Wrightv. OasisLegalFin.,LLC,No.4:19CV-926-RWS,2020WL1433645,at(cid:13)3(E.D.Mo. Mar.24,2020) cid:179)UnderMissourilaw,unconscionabilitycanbeprocedural,substantive oracombinationofboth.(cid:180 (citationomitted)(cid:30)Cordovav.WorldFin.Corp.ofN.M.,

208P.3d901,908(N.M.2009) cid:179)Whilethereisagreaterlikelihoodofacontract(cid:182)s beinginvalidatedforunconscionabilityifthereisacombinationofbothproceduraland substantiveunconscionability,thereisnoabsoluterequirementinourlawthatboth mustbepresenttothesamedegreeorthattheybothbepresentatall.(cid:180 .

54.See,e.g.,Payanv.OwenVill.,LLC,No.8:21-CV-01956-(cid:45)LS-DFM,2022WL 18278603,at(cid:13)2(C.D.Cal.(cid:45)uly12,2022) cid:179)Both(cid:62)substantiveandprocedural unconscionability(cid:64)arerequiredunderCalifornialaw.(cid:180 (citationomitted)(cid:30)AudioVisual Innovations,Inc.v.Spiessbach,119So.3d522,526(Fla.Dist.Ct.App.2013) cid:179)Both an unconscionability substantive unconscionabilitydefensetoanarbitrationagreementinFlorida.(cid:180 (citationomitted).

procedural

required

support

and

are

to

55.SeeValliv.AvisBudgetRentalCar(cid:42)rp.,No.14-6072 cid:45)BC),2023WL 6579150,at(cid:13)8(D.N.(cid:45).Oct.10,2023)(citingRomerov.AllstateIns.Co.,52F.Supp. 3d715,734(E.D.Pa.2014) cid:179)(cid:62)T(cid:64)hereisvariationamongthestates(cid:182)lawsand...some statesonlyrequireeithersubstantiveorproceduralunconscionabilitywhileothers requirebothsubstantiveandproceduralunconscionability.Thisdistinctionaloneis enoughtomakecertificationonalimitedissue(onethatwouldnotevenfinallyresolve theunconscionabilityquestion)unworkable.(cid:180 (denyingclasscertificationbecause,in part, (cid:62)regarding unconscionability(cid:64)(cid:180 (cid:30)seealsoBekelev.Lyft,Inc.,199F.Supp.3d284,300(D.Mass. 2016)(recogni(cid:93)ingthatCalifornia(cid:182)sunconscionabilitydoctrineisdifferent than Massachusetts(cid:182)unconscionabilitydoctrine).

conflictbetweenthe

lawsofdifferent

(cid:179)there

state

is

a

56.CompareRodrigue(cid:93)v.RaymoursFurnitureCo.,138A.3d528,541(N.(cid:45).2016) (statingtheabbreviatedstatuteoflimitationsprovisionisnotenforceable),Ronderosv. USFReddaway,Inc.,114F.4th1080,1089(9thCir.2024)(notingtheone-year, contractualstatuteoflimitationsperiodissubstantivelyunconscionable),with(cid:61)innv. ADTLLC,No.CV-17-03037-PH(cid:59)-DLR,2018WL526899,at(cid:13)3(D.Ari(cid:93).(cid:45)an.24, 2018)(holdingabbreviated,one-yearstatuteoflimitationsperiodsetforthincontractis notsubstantivelyunconscionable),andSmithv.TAOperatingLLC,No.10-2563FLW,2011WL3667507,at(cid:13)5(D.N.(cid:45).Aug.19,2011)(statingtheabbreviatedstatute oflimitationsisnotsubstantivelyunconscionable),andHega(cid:93)yv.Halal(cid:42)uys,Inc., No.22-cv-01880-(cid:45)HR-(cid:46)HP,2023WL8924092,at(cid:13)8(S.D.N.(cid:60).Dec.27,2023) (determiningtheabbreviatedsix-monthlimitationperiodisenforceable).

57.SeeHaishaCorp.v.SprintSols.,Inc.,No.14-cv-2773-(cid:42)PC-MDD,2015WL 224407,at(cid:13)6(S.D.Cal.(cid:45)an.15,2015)(collectingconflictingcases)(cid:30)Wallacev.Red BullDistrib.Co.,958F.Supp.2d811,823(N.D.Ohio2013)(disagreeingwith conclusionsofCaliforniacourtsfindingproceduralunconscionabilitywherecontract failstoattachacopyofgoverningarbitralrules)(cid:30)Baghdasarianv.Macy(cid:182)s,Inc.,No. CV-21-04153-AB-MAAx,2021WL12251599,at(cid:13)9(C.D.Cal.Oct.28,2021) (collectingconflictingcases).

58.See,e.g.,Miracle-Pondv.Shutterfly,

Inc.,No.19-cv-04722,2020WL 2513099,at(cid:13)5(N.D.Ill.May15,2020) cid:179)Illinoiscourtshaverepeatedlyrecogni(cid:93)ed theenforceabilityofarbitrationprovisionsaddedviaaunilateralchange-in-terms clause.(cid:180 (cid:30)(cid:42)ibsonv.NyeFrontierFord,Inc.,205P.3d1091,1097(Alaska2009) cid:179)Arbitrationclausesthatmaybechangedunilaterallyareunconscionable.(cid:180 (cid:30)(cid:45)eanv. BucknellUniv.,No.4:20-CV-01722,2021WL1521724,at(cid:13)13(M.D.Pa.Apr.16, 2021)(holdingthatthemodificationclausemadearbitrationagreementunconscionable underPennsylvanialaw)(cid:30)(cid:42)alvanv.Michael(cid:46)orsUSAHoldings,No.CV-16-07379BRO-AFMx,2017WL253985,at(cid:13)8(C.D.Cal.(cid:45)an.19,2017)(collectingconflicting cases)(cid:30)Lyonsv.NBCUniversalMedia,LLC,No.CV-19-3230-MWF cid:45)EMx),2019 WL6703396,at(cid:13)10(C.D.Cal.Sept.27,2019)(recogni(cid:93)ingconflictingcases).

59.See,e.g.,Doppv.NowOptics,LLC,No.D081665,2024WL2265759,at(cid:13)7 (Cal.Ct.App.May20,2024)(statingtheconfidentialityrequirementinarbitration clauseissubstantivelyunconscionable)(cid:30)Tavennerv.Int(cid:182)lBus.MachinesCorp.,No. 21-CV-6345-(cid:46)M(cid:46),2022WL4449215,at(cid:13)8n.10(S.D.N.(cid:60).Sept.23,2022)(holding aconfidentialityprovisionisneithersubstantivelynorprocedurallyunconscionable underNew(cid:60)orklaw)(cid:30)Mainvillev.Coll.TownPi(cid:93)(cid:93)a,Inc.,629F.Supp.3d913,923 (D.Minn.2022)(determiningthattheconfidentialityprovisioninanarbitrationclause isnotunconscionableunderMinnesotalaworWisconsinlaw)(cid:30)Addit,LLCv. Hengesbach,341So.3d362,370(Fla.Dist.Ct.App.2022)(collectingconflicting decisions).Thisanalysis,likeallissuesinvolvingunconscionability,candifferfrom statetostate.See,e.g.,(cid:46)abav.Aerotek,Inc.,No.1:23-cv-00084-(cid:45)MS-TAB,2023WL 2787958,at(cid:13)2(S.D.Ind.Apr.4,2023)(decliningtodecidewhetherconfidentiality provisionisunconscionableunderMarylandlawandrecogni(cid:93)ingthatdecisionsfrom other(cid:77)urisdictionsarenotapplicable).

60.SeeMabev.OptumRx,No.3:17-CV-01102,2024WL3498353,at(cid:13)8n.9 (M.D.Pa.(cid:45)uly22,2024)(acknowledgingdifferentcourtconclusionsregardingthe unconscionabilityandenforceabilityof Compare Fergusonv.CountrywideCreditIndus.,Inc.,298F.3d778,780(9thCir.2002)

thesamearbitrationclause).

(invalidatingarbitrationclauseunderCalifornialaw),withCarterv.Countrywide CreditIndus.,Inc.,362F.3d294,301(5thCir.2004)(enforcingarbitrationclause underTexaslaw).

61.CompareTHIofN.M.atHobbsCtr.,LLCv.Patton,741F.3d1162,1169 (10thCir.2014)(enforcingarbitrationclauseinnursinghomeagreement),with Figueroav.THIofN.M.atCasaArenaBlanca,LLC,306P.3d480,485(N.M.Ct. App.2012)(invalidatingidenticalarbitrationclauseasunconscionable)(cid:30)comparealso BDOSeidmanv.Miller,949S.W.2d858,861(Tex.Ct.App.1997)(invalidating arbitrationclauseunderTexasandNew(cid:60)orklaw),withBDOSeidman,LLPv.Bee, 970So.2d869,875(Fla.Dist.Ct.App.2007)(enforcingidenticalarbitrationclause andrecogni(cid:93)ingconflictingdecisions).

62.SeeCanteenv.CharlotteMetroCreditUnion,881S.E.2d753,755(cid:177)56(N.C. Ct.App.2022)(collectingconflictingcases)(cid:30)Rasschaertv.FrontierCommc(cid:182)nsCorp., No.12-3108(DWF(cid:18)(cid:45)SM),2013WL1149549,at(cid:13)7(D.Minn.Mar.19,2013) (applyingMinnesotalawtoconcludethatchange-in-termsprovisionpermits amendmenttorequirearbitration).

63.SeeEllerbeev.(cid:42)ameStop,Inc.,604F.Supp.2d349,354(D.Mass.2009) (applyingMassachusettslawandholdingthatanemployee(cid:182)scontinuedemploymentis adequateconsiderationforanarbitrationagreement)(cid:30)Harrisv.VoltMgmt.Corp.,625 S.W.3d468,477n.4(Mo.Ct.App.2021)(recogni(cid:93)ingthatunderMissourilaw continuedemploymentisnotadequateconsiderationforanarbitrationagreement).

64.See(cid:42)lenMartinEng(cid:182)g,Inc.v.HuaweiTechs.(cid:45)amaicaCo.,No.09-4083-CVC-N(cid:46)L,2010WL318504,at(cid:13)2(W.D.Mo.(cid:45)an.20,2010)(applyingMissourilaw, enforcingarbitrationclause,andconstruingarbitrationclauseinharmonywith(cid:77)udicial forumselectionclause)(cid:30)(cid:42)raddyv.CarnegieAcad.,LLC,No.1:21-cv-00639-SD(cid:42), 2022WL903193,at(cid:13)4(N.D.(cid:42)a.Mar.28,2022)(findingnothinginconsistent betweenthearbitrationclauseandtheforumselectionclauseincontract).

65.SeeMillsv.ButlerSnowLLP,No.3:18-CV-866-CWR-F(cid:46)B,2019WL 4346587,at(cid:13)6(S.D.Miss.Sept.12,2019)(findingnoobligationtoarbitrateunder lawbecauseofinconsistentarbitrationand(cid:77)udicialforumselection Mississippi clauses)(cid:30)Ogunyemiv.(cid:42)ardenStateMed.Ctr.,313A.3d420,422(N.(cid:45).Super.Ct. App.Div.2024)(findingnoobligationtoarbitrateunderNew(cid:45)erseylawbecauseof inconsistentarbitrationand(cid:77)udicialforumselectionclauses).

66.No.8:17-cv-201-T-23T(cid:42)W,2017WL3971457,at(cid:13)1(M.D.Fla.Sept.8,

2017).

67.Seeid.at(cid:13)1. 68.Seeid.at(cid:13)4. 69.Seeid. Id. 70. 71.Unigroup,2017WL3971457,at(cid:13)5. 72. 73.

Id. Id.

Id. Id.

74. 75. 76.SeeUnigroup,2017WL3971457,at(cid:13)4(cid:177)5(cid:30)seealsoChenv.BMWofN.Am., LLC,No.21-cv-03531-DMR,2021WL3604691,at(cid:13)3(N.D.Cal.Aug.13,2021) (recogni(cid:93)ingconflictingdecisionsregardingtheenforceabilityofBMW(cid:182)slease agreementinconnectionwithnon-signatories).

77.SeeDelaneyv.Dickey,242A.3d257,275(N.(cid:45).2020)(invalidatingthe arbitrationclauseinthelawyer-clientagreementforabreachoffiduciarydutyunder New(cid:45)erseylaw).

78.SeeDick-Ipsenv.Humphrey,Farrington(cid:9)McClain,P.C.,No.1-24-1043,

2024WL4001124,at(cid:13)6(Ill.App.Ct.Aug.30,2024).

79.See,e.g.,Pandolfiv.Avia(cid:42)ames,Inc.,No.23-cv-05971-EMC,2024WL 3558853,at(cid:13)9(N.D.Cal.(cid:45)uly26,2024)(abbreviatedstatuteoflimitationsprovisionis substantivelyunconscionable).

80.See,e.g.,Reyesv.(cid:42)racefully,Inc.,No.17-CV-9328(VEC),2018WL 2209486,at(cid:13)7(S.D.N.(cid:60).May11,2018)(abbreviatedstatuteoflimitationsprovision doesnotallowclaimanttoeffectivelyvindicateherrights).

81.See,e.g.,HootersofAm.,Inc.v.Phillips,173F.3d933,940(4thCir.1999)

(findingthatone-sidedarbitralrules(cid:179)violatethecontractualobligationofgoodfaith(cid:180 .

82.See,e.g.,Hernande(cid:93)v.BrinkerInt(cid:182)lPayrollCo.,No.20-17667(MAS)(T(cid:45)B), 2021WL4482836,at(cid:13)3(cid:177)5(D.N.(cid:45).Sept.30,2021)(discussingdifferencesamongthe contractlawsofHawaii,Maine,Tennessee,andNew(cid:45)erseywithrespecttominorsand whetherminorsareboundtoanarbitrationagreement).CompareSiddlev.Crants,650 F.Supp.2d773,782(M.D.Tenn.2009)(determiningaduressdefenseunder Tennesseelawmustbedemonstratedby(cid:179)clear,cogentandconvincing(cid:180)evidence),with Doev.Steele,No.20-cv-1818-MMA(MSB),2021WL927363,at(cid:13)8(S.D.Cal.Mar. 11,2021)(notingunderCalifornialaw,(cid:179)(cid:62)t(cid:64)hepartyassertingthatanagreementwas formedunderduressbearstheburdenofproofbyapreponderanceoftheevidence(cid:180 .

83.See,e.g.,DowCorningCorp.v.SafetyNat(cid:182)lCas.Corp.,335F.3d742,746

(8thCir.2003)(applyingFAAtonon-bindingarbitration).

84.See,e.g.,Dluhosv.Strasberg,321F.3d365,372(3dCir.2003)(non-binding processisnotarbitrationundertheFAA)(cid:30)DrucoRests.,Inc.v.SteakNShakeEnters., No.1:13-cv-00560-L(cid:45)M-DML,2013WL5779646,at(cid:13)6(S.D.Ind.Oct.9,2013) (recogni(cid:93)ingcircuitsplitonissueofwhetherarbitrationmustbebindinginorderfor FAAtoapplyandholdingthattheFAAdoesnotcover(cid:179)non-bindingarbitration(cid:180)in franchiseagreement).

85.SeeBotaiv.SafecoIns.Co.ofIll.,No.2:14-CV-00445-E(cid:45)L-REB,2015WL 4507486,at(cid:13)2(cid:177)4(D.Idaho(cid:45)uly24,2015)(recogni(cid:93)ingconflictingdecisionsfrom different(cid:77)urisdictions)(cid:30)Wash.Auto.Co.v.1828LSt.Assocs.,906A.2d869,875,877 (D.C.2006)(collectingconflictingcases).

86.No.1:13-cv-00560-L(cid:45)M-DML,2013WL5779646(S.D.Ind.Oct.9,2013). 87. 88.

Id.at(cid:13)6. Id.(quoting9U.S.C.(cid:134)2).

IV.CON(cid:42)RESSSHOULDADOPTAUNIFORM,NATIONALSTANDARD (cid:42)OVERNIN(cid:42)ARBITRATIONA(cid:42)REEMENTS

Id.at783(cid:177)84.

89.DrucoRests,Inc.v.SteakNShakeEnters.,765F.3d776,782(7thCir.2014). 90. 91.Bakossv.CertainUnderwritersatLloydsofLondonIssuingCertificateNo. 0510135,707F.3d140,143(2dCir.2013)(acknowledgingcircuitsplit)(cid:30)(cid:42)reatAm. Ins.Co.v.CrystalShoresOwnersAss(cid:182)n,No.SC-2023-0092,2023WL8858165,at(cid:13)6 (Ala.Dec.22,2023)(observingconflictingdecisionsastowhetherstatelaworfederal lawcontrols).

92.See,e.g.,Stolt-NielsenS.A.v.AnimalFeedsInt(cid:182)lCorp.,559U.S.662,685 (2010) cid:179)Inbilateralarbitration,partiesforgotheproceduralrigorandappellatereview ofthecourtsinordertoreali(cid:93)ethebenefitsofprivatedisputeresolution: lowercosts, greaterefficiencyandspeed,andtheabilitytochooseexpertad(cid:77)udicatorstoresolve speciali(cid:93)eddisputes.(cid:180 (internalcitationomitted).

93.SouthlandCorp.v.(cid:46)eating,465U.S.1,19(1984)(emphasisadded). 94.353U.S.448,451(1957). 95.SeePlumbers(cid:9)PipefittersLocal625v.NitroConstr.Servs.,Inc.,27F.4th 197,200(cid:177)01(4thCir.2022) cid:179)Thefederalcommonlawtobeappliedin(cid:134)301casesis ordinarilythegenerallawofcontracts.(cid:180 (citationsomitted)(cid:30)seealsoTrs.oftheOhio BricklayersPensionFundv.Trs.oftheSkillcraftSys.ofToledo,Inc.,99F.App(cid:182)x 600,602(6thCir.2004)(applyingfederalcommonlawtodeterminewhetheranonsignatoryisboundbyacollectivebargainingagreementunderthedoctrineof promissoryestoppel).

96.AtriCure,Inc.v.Meng,12F.4th516,522(6thCir.2021).TheSixthCircuitin AtriCurerecogni(cid:93)edthatthisinterpretationoftheSavingsClausewouldbeanalogous tothe(cid:179)uniformfederaltesttiedtothecommonlawofagencythatguideswhethera personisan(cid:181)employee(cid:182)under(cid:62)ERISA(cid:64).(cid:180) Id.(citingNationwideMut.Ins.Co.v. Darden,503U.S.318,322(cid:177)23(1992 .

97.SeeImreStephenS(cid:93)alai,TheFutureofArbitrationintheUnitedStates: Textualism,ATectonicShift,andaReshapingoftheCivilJusticeSystem,25CARDO(cid:61)O (cid:45).CONFLICTRESOL.13,15(2024).

98.SeeSouthlandCorp.v.(cid:46)eating,465U.S.1,19(1984). 99.Perryv.Thomas,482U.S.483,492(cid:177)93n.9(1987).Withtheeffective vindicationdoctrine,adoctrineofarbitrationlawthatexistedandwasusedbycourts fordecades,theCourthasbackpedaledanddismissedthisdoctrineasmeredictum. SeeAm.ExpressCo.v.ItalianColorsRest.,570U.S.228,235(2013).

100.Cf.Fed.R.Evid.501 cid:179)Thecommonlaw(cid:178)asinterpretedbyUnitedStates courtsinthelightofreasonandexperience(cid:178)governsaclaimofprivilegeunlessany ofthefollowingprovidesotherwise:theUnitedStatesConstitution(cid:30)afederalstatute(cid:30)or rulesprescribedbytheSupremeCourt.(cid:180 .

101.U.C.C.(cid:134)(cid:134)2-302,2-318(Am.L.Inst.(cid:9)Unif.L.Comm(cid:182)n1966).

V.CONCLUSION

102.Virtuallyallof

thewrittenandverbal

testimonypresentedduring CongressionalhearingsregardingthebillsthatwouldbecometheFAAcamefrom witnesseswhoappearedonbehalfoforattherequestofbusinesses,andmorethan seventycommercialorgani(cid:93)ationssupportedthebills,withnoopposition. See generallyBillstoMakeValidandEnforceableWrittenProvisionsorAgreementsfor ArbitrationofDisputesArisingOutofContracts,MaritimeTransactions,orCommerce AmongtheStatesorTerritoriesorwithForeignNations:JointHearingsBeforethe Subcomms.oftheComms.ontheJudiciaryonS.1005andH.R.646,68thCong. (1924). 103.

Id.at17(statingthatwiththe(cid:77)udicialmachinerysupportingarbitration, arbitrationcanproceed(cid:179)insideofthreeorfourdays(cid:180 (cid:30)id.at36(recogni(cid:93)ingthere shouldbenodelayswiththeFAA(cid:182)sprocess,exceptfora(cid:179)fewdays(cid:180)whenthecourt(cid:179)is decidingwhetheranorder(cid:62)compellingarbitration(cid:64)shouldbeentered(cid:180 .